Further to the ongoing divergence in the market, which has seen institutional and retail investors boycott the biggest market rally since 2009, with equity funds suffering their biggest outflows since 2008...

... even as buybacks, occasional short squeezes and gamma-imbalanced dealers keep bidding up the S&P500, a new variation on a theme has emerged.

Nomura - Team - Lead - Masanari - Takada

As Nomura's quant team lead by Masanari Takada writes, "with a euphoric mood prevailing, the S&P500 is approaching ~2,900, supported by buying inertia in a lower volatility environment." Ah yes, but the question again is who is behind the buying, and as Takada notes, there has been no noticeable change in the exposure of major speculative players, "but we estimate CTAs or systematic trend-followers bought a small amount of US equity futures to passively follow the market trend."

That said, as the chart below shows, even these systematic players are tentative at best, and furthermore, the buying speed of CTAs on S&P500 futures and NASDAQ100 futures seems to be gradually decelerating. However, as Nomura cautions, if the S&P500 does break above ~2,900 and its momentum increases further, CTAs will be compelled to return to their buying stance.

Companies - Buyback - Blackout - Window - Outright

However, with most companies now in the buyback blackout window, few outright shorts left standing, and VIX net spec near record short positions, one key group continues to ignore the move higher. And as Nomura writes, the bank currently views how “discretionary” players such as equity L/S funds and global macro HFs – who maintain a cautious view on the sustainability of the US stock market rally – behave as an important factor. "Important", mostly, because unlike their algo and quant peers, the carbon-based traders making the discretionary decisions whether to buy stock, refuse to drink the cool aid.

And this is where Marko Kolanovic's bullish theory comes in: as a reminder, the JPM...